Working to Give Consumers the Transparency They Deserve

Today, Professor Warren is testifying before Congress on our progress in building the consumer bureau. In her written testimony, she discusses our Know Before You Owe project:

At the CFPB, we believe that a simple and straightforward presentation of key credit terms is the best way to level the playing field between borrowers and lenders and to foster honest competition. Our goal is shorter, clearer forms for the most common credit products, the kind that consumers can read in a few minutes with high levels of understanding. The CFPB is working to give consumers the transparency they deserve to make the choices that work for themselves and their families, while easing unnecessary regulatory burdens for their lenders.

In my first week on the job, the Treasury Department sponsored a symposium that brought together lenders and consumer advocates to discuss how to simplify federal mortgage disclosures. Consumer groups explained that many consumers didn’t use current disclosures to assess costs or to compare alternatives because the forms are complicated and hard to use. The forms came under even more intense criticism from those who have to fill them out. Mortgage originators, particularly community banks and credit unions that work closely with their customers, described paperwork that was costly to complete, even as it produced little value for borrowers. Now, after months of consultation with borrower and lender representatives, we have developed prototype short mortgage shopping sheets that will be tested with actual consumers and, eventually, result in a simple, streamlined mortgage disclosure that will replace the two existing, complicated forms.

The new consumer bureau is making the early form drafts publicly available, long in advance of the formal process of notice-and-comment for official rule-making. We are seeking feedback early and often from consumers, lenders, brokers, and others now, and we will continue to do so as we refine the forms. We have posted draft forms online, while they are still in the design phase, and we have asked the public to weigh in. We will share the input we receive with our testers and designers, factoring it into our design process. We hope that these expanded procedures will permit us to engage a broader constituency, helping us deliver on the promise of this agency embodied in the Dodd-Frank Act.